When it comes to storing your Bitcoin and other various cryptocurrencies, there are a few options at hand. They come in two different forms, custodial and non-custodial wallets. Here, we will take a look at both.
Defining A Non-Custodial Wallet
A non-custodial wallet refers to a wallet where users solely hold their private keys and have full control over what happens with their money. In most non-custodial wallets, the keys will be held in encrypted storage.
There are a few different examples of non-custodial wallets that are available on the market, such as a hardware wallet. This is something a bit different for crypto, where a physical device is used to disconnect from the internet, permanently storing the data on there.
You can also get a web-based wallet, where it is stored online, where you can access them anywhere on any device, through your private login.
The last example of a non-custodial wallet is a desktop wallet. These can be stored offline, via a file on a computer desktop. Of course, the risk here is that if your computer breaks, including your storage device, then you run the risk of losing It forever. The same can be said if your device in general is stolen.
Defining A Custodial Wallet
A custodial wallet is much more common amongst the crypto world, essentially it gives control over your keys to a private company, usually online. This third party will secure your funds and keys and will return them to you upon request.
They are popular as they allow users to not have as much responsibility when it comes to holding their funds, and you can focus on other matters.
It’s important that you use a trustable custodial wallet service, such as Paxful. They are considered one of the best Bitcoin wallet providers currently on the market, with over six million users. They also offer a 0% commission fee rate for their service.
Whilst it may seem that custodial wallets are less secure, as you don’t have sole ownership, it’s actually for the best. Usually, there is a reason for this, as these third-party sites build their entire business and stake their reputation on their security.
The Reasons You’d Use Either
There are various reasons for using either example of wallets, but it all comes down to personal preference. For example, if you’re new to dealing with Bitcoin, then it’s probably in your best interest to work with a third-party wallet provider.
This is because it’s the easiest and best way to secure your keys early days, especially as you’re trying to get to grips with all things crypto. They are highly secure, and you will have a business that will work with you if you were to lose any details or have any security risks.
With a non-custodial wallet, if you lose your details, such as a password, then the only person who will be able to help is you. Which will do you no good if you’ve completely lost it.